Europe Strives to Overcome Its Reliance on Russian Gas

A member of a Ukrainian delegation posing at a gas compressor station in the Slovak town of Velke Kapusany, near the border with Ukraine.CreditCreditFilip Singer/European Pressphoto Agency

By David Buchan

Oct. 28, 2014

LONDON — In the early 1980s, the Reagan administration warned its West European allies about their growing dependence on Russian gas. The Europeans paid no heed. They had found the Soviet Union to be a reliable supplier of gas over the previous decade, and they all — Margaret Thatcher included — refused to comply with a United States demand to stop their companies from selling technology with American origins to build new pipelines to bring more gas to Western Europe from Siberia.

Now, the Ukraine crisis has opened up a deep political rift with Russia, Europe’s largest single foreign supplier of not only gas, but also oil, coal and nuclear fuel — and that long-ago warning by the United States looks prescient.

For Europe, growing reliance on imported fossil fuels is a fact of life that will not change greatly for years. Europe’s domestic production of oil, gas and coal is in steady decline. Replacing fossil fuels with home-produced renewable energy like solar and wind power and building a new generation of nuclear reactors will be a long and expensive process.

The issue for Europe is not reducing overall import dependence, which is in any case a meaningless average for the European Union’s 28 states. Those nations have very different energy sources and patterns of consumption.

Rather, the issue is to minimize individual European nations’ vulnerability to energy cutoffs by multiplying grids and pipelines within the European Union and by diversifying energy sources outside the union.

With regard to Russia, the problems are all in Central and Eastern Europe. Countries like Poland, Bulgaria, Slovakia and Lithuania are all vulnerable to cutoffs of Russian gas. Some are also vulnerable because of a dependence on Russian nuclear reactors and fuel.

The European Union should have tackled these vulnerabilities when it admitted post-communist Eastern Europe in the last decade. With the Ukraine crisis it is playing an urgent game of catch-up.

So far in the Ukraine crisis the European Union and the United States have resorted more than Russia to using energy as a weapon, by denying Moscow the technology for shale development and Arctic drilling and by imposing sanctions on Russian energy companies. But they have not imposed sanctions on Gazprom, the Russian giant, whose gas is considered vital for Europe.

Gazprom has cut off gas to Ukraine because of a dispute over prices, but not gas transiting Ukraine to European Union countries. Both the union and Russia want to maintain their gas links, which lock them into mutual dependence — Europe needing the energy, Russia the money.

The gas link may yet snap as the European Union and Russia turn away from each other. The union has several outstanding competition disputes with Gazprom over the use and abuse of pipelines, and Moscow has undermined negotiations to resolve these disputes by mounting a wholesale challenge against European Union energy law at the World Trade Organization.

The union had long worked to bring post-Soviet Russia into a single energy market of agreed rules, but that diplomatic effort has come to a dead end, and Brussels is now having to rethink its energy security.

Recent years have seen the European Union lurch from placing a high priority on climate policy to growing concern about the impact of rising renewable energy costs on industrial competitiveness, and then to abrupt alarm this year about the energy security fall-out of the Ukraine crisis.

European leaders are trying to come up with new energy policies, including targets on emissions reductions that will run through 2030, to give Europe a leadership role in next year’s United Nations climate negotiations in Paris.

Most European leaders, especially in Western Europe, appear ready to go along with proposals already made to raise the goals for 2030 to a 40 percent reduction in emissions from 1990 levels, a 27 percent renewable share of total energy and an energy efficiency improvement of 30 percent. But these targets would pose energy security and cost problems for East European nations.

Energy security and the union’s ambitious goals on reducing emissions clash in Poland, which would prefer to burn its large reserves of domestic coal, which produces high emissions of carbon dioxide.

Poland is already paying a stiff price to achieve some energy independence from Russia by buying liquefied natural gas from Qatar, which costs more than Russian pipeline gas. Lithuania is doing much the same thing by buying L.N.G. from Norway. All European buyers of L.N.G. are having to bid against the very high price that Japan is willing to pay, as will be the case for future L.N.G. exports from the United States.

What is clear is that East European influence on energy policy will now be stronger in European Union institutions. A former Polish prime minister, Donald Tusk, is set to become president of the European Council in December, and another former Polish prime minister, Jerzy Buzek, now chairs the European Parliament’s energy committee.

Yet East Europeans are themselves divided in their views about Russian gas. The Baltic states remain eager to reduce their energy dependence on Russia by building pipelines that would enable them to exchange gas with Nordic countries and Poland, and by buying L.N.G.

Mr. Tusk is pushing a plan for smaller countries to form a buyers’ cartel that would allow them to negotiate better terms with foreign suppliers. But collective buying may violate competition rules, and it is unclear whether it will be pursued.

At the same time, several countries in southeast Europe, including Bulgaria, Greece, Hungary and to some extent Austria, remain enthusiastic about obtaining a direct feed of Russian gas through the South Stream pipeline, which Gazprom proposes to build across the Black Sea. They think the pipeline would reduce risk of cutoffs by bypassing Ukraine, while most other European countries, plus Brussels, lean against it because it would largely remove a key card that Kiev has in its duel with Russia.

Finally, Brussels is urging some East European countries to help Ukraine offset the lack of Russian gas by providing it with gas from the West. But these countries tend to depend on Russian gas and are mistrustful of Kiev’s record of nonpayment.

East European countries may now have greater influence in Brussels. But with these divisions among them, it is unclear how this will translate into new policy action.